Teaching Your Kids to Invest: A Fool and His Family

Why should you teach your kids about investing?

For Motley Fool co-founder Tom Gardner, investing is more than an individual action. Instead, Tom sees investing as "a whole family affair ... It's a way we've learned about the world together."

At the Fool, we define this interlaced investing approach as "whole family investing." Whole family investing means involving not only the parents in the process, but the kids, too. The nation's greatest investor, Warren Buffett, started investing at age 11. Our own Tom and David Gardner come from a long line of young investors, stretching back to when their grandfather first bought stock at age 6. Teaching children about investing gives children investing principles that can guide their money management for years to come (and it's a lot of fun).

One Foolish member not only understands the benefits of whole family investing, but has already jumped into teaching his young daughter

The Foolish Yun family.

about the stock market. Ted Yun is that Fool. In May, Ted took to the boards to describe a school project he helped his daughter with:

As I mentioned, my daughter had a school project called "The Expert Fair." The students were tasked to pick a subject, research it and prepare a poster presentation

My daughter initially wanted to do it on Hershey's chocolate, then the American Girl doll. My wife and I groaned at these choices. ... So after wracking her brain for a theme, we "gently" suggested to do it on the Stock Market, since one of her after-school activities was to do the Stock Market Game with her friends. Not many other kids were doing this, so she was able to legitimately claim the "expert" title on this topic.

I'm very proud of her! ...

I'm happy we did this though. I've been trying to get her more involved with stocks. With the Stock Market Game and our monthly stock picking sessions, she gets an idea about what we are doing, but she didn't really understand why we were doing it.

I think this project really made her think about everything we've discussed about investing. By writing everything out, and having to present it to other people, I think the concepts really sank in. I even managed to get her to understand compound interest and why it was better than adding a fixed amount every year. I'll keep you updated whether these lessons stick with her.

Ted sees teaching his children about investing as a continuation of teaching them about money management, yet he sees investment education lacking in the American educational system -- something he believes needs to change. He says, "It is imperative to teach children about investing as a component of learning about how to manage money." Teaching children about investing, Ted believes, gives children investing principles that can guide their money management for years to come.

Although he only recently started teaching his children about investing, he already has a lot of thoughts and hopes for their future:

I am now just starting my kids on the path to becoming Little Fools. ... At school and at home, our children learn about earning money, staying out of debt, paying bills, and saving in their bank account, but little is taught about investing. That must change.

My hope is that by introducing my kids to investing at an early age, they won't be intimidated by stocks, nor will they jump head-first into the market by recklessly trading in and out of stocks.

At 7 years old, my son Erik, understands the concept of being a part owner in his favorite businesses. My daughter Elisenne, 10 years old, understands the main concepts of investing: buying a business that sells products she believes in; building a diversified portfolio; dollar-cost averaging into positions; and most importantly, holding for the long term. I believe these principles are all she needs to know in order to successfully invest.

When Ted grew up, he saw only the affluent invest in the stock market -- the mysterious place where "fortunes were made and fortunes were lost." He believes this attitude persists today because of a lack of education about investing. Ted explains, "People shouldn't approach the stock market like a lottery, nor should they fear that they will lose their savings."

After starting to invest in 1998 with a traditional IRA, Ted moved to purchasing stocks in 2003 and found The Motley Fool that same year after researching how to invest. "What I really like about The Motley Fool is that, from Day 1, Dave and Tom have made it their mission to demystify the market." While Ted initially subscribed to the Fool for investing ideas, he stays because of the investment advice -- advice that he's handing down to the next generation.